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Cryptocurrency Laundering? Colombia Drug Traffickers Eye Bitcoin

Bitcoin has proved popular in Colombia, especially in small retail operations. But is it being used by criminals?

Police guard a street in Bogota.
Police guard a street in Bogota.
Camilo Vega Barbosa


BOGOTÁ — The cryptocurrency sector has come to be worth almost as much to the Colombian economy as tourism, accounting for just over 2% of GDP. Yet for some analysts, it is starting to come with that smell of laundering for dirty money.

For its sudden and dramatic growth, Bitcoin is no longer viewed as a fad in Colombia. At the start of this year (when its price was around $14,000), Citi Research found Bitcoin trading to be worth over 2% of Colombia's GDP, not far behind tourism's 2.8%.

And while its price has dropped in recent days, bringing its weight closer to 1% of GDP, it remains an important economic factor and disconcerting for its volatility. The Bloomberg news agency cites Colombia as the third country in the world, behind China and Nigeria (and top in Latin America) in terms of growth in Bitcoin transactions. These grew 1,200% in 2017, which means this volatile and controversial cryptocurrency's behavior is more important to the Colombian economy than previously thought.

The country would be wise to begin considering some of Bitcoin's more disturbing traits, like the fact that encrypting impedes tracking operators and makes this an ideal payment method in ransomware or suited to money laundering.

Camilo Silva, an analyst with the investment firm Valora Inversiones, explains that its "boom in Colombia and the world has to do with the increasing entry of expert and non-expert operators, including plenty of millennials. Huge returns of more than 1,500% in 2017 are attracting more and more people."

But Silva warns, "in countries like Colombia where drug trafficking shifts a lot of money around, illegal groups see in cryptocurrencies an opportunity for moving this money without detection. And Colombia stands out for being one of the countries where trading volume has risen most. Our history of illicit activities could be the differentiating factor giving us our leading position."

Each person is responsible for the risks involved.

Bitcoin is barely regulated in Colombia, with little more than official comments and circulars concerning it. The Central Bank points out that it is not a currency in Colombia and, "thus does not constitute a legal means of payment. There is thus no obligation to accept it as a means of meeting obligations. Nor is it an asset that can be considered a currency, as it does not receive the backing of the central banks of other countries. Consequently, it may not be used for payment of transactions within the exchange system expedited by the Issuer's board of directors."

The financial regulator SFC, a Finance Ministry official, has also told entities overseas that they cannot "keep, invest, mediate in or operate with such instruments, nor allow the use of their platforms for operations with virtual currencies." It has advised the public that each person is responsible for the risks involved in cryptocurrency transactions, "as they are not protected by any private or public guarantee, nor their operations liable to be covered by any deposit insurance."

Colombian laws currently impede Bitcoin's penetration into the financial system, but not other sectors of the economy. All that is needed is for a buyer and a seller to download an application to pay for products with Bitcoin, which allows the pseudo-currency to flow into the retail sector (as happens in China) and other activities.

Horacio Ayala, a former head of the customs authority DIAN, says "if Bitcoin is already 2% of Colombia's GDP, it means this market has grown more than we had thought, which undoubtedly means it's time for Colombian authorities to intervene. The government must prevent the use of this cryptocurrency as a means of payment, to avoid it entering businesses and other key sectors. Those betting on using it should stay within the international, high-risk investments sector."

Photo: Andre Francois/Unsplash

Ayala warns that "by its nature, which makes it very difficult to track, Bitcoin is ideal for laundering assets and tax avoidance. One mustn't forget Colombia is a country where there is too much illicit money. In addition to our difficulties in detecting offshore accounts, which at least leave some kind of trail, the problem is worse with cryptocurrencies."

The Central Bank recognizes in one of its own documents the principal challenge of safeguarding "financial integrity in terms of money laundering and financing of terrorism, and taking corresponding preventive measures of monitoring transactions and obligation to report specific movements to control authorities. By nature, cryptocurrencies are platforms that can facilitate movement of resources associated with money laundering and terrorist financing and thus, participants must be monitored by competent authorities."

We should reconsider Bitcoin not just for the intriguing way it has broken certain standards, but for its increasing relevance to our economy.

Moves by platforms like Facebook, which will ban advertising for virtual currencies, threats by the U.S. government to regulate its market, and dramatic price drops like the one on February 5, after four big banks said their customers could not buy Bitcoins with their credit cards, may all have a major impact on the Colombian economy.

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FOCUS: Israel-Palestine War

After Abbas: Here Are The Three Frontrunners To Be The Next Palestinian Leader

Israel and the West have often asked: Where is the Palestinian Mandela? The divided regimes between Gaza and the West Bank continues to make it difficult to imagine the future Palestinian leader. Still, these three names are worth considering.

Photo of Mahmoud Abbas speaking into microphone

Abbas is 88, and has been the leading Palestinian political figure since 2005

Thaer Ganaim/APA Images via ZUMA
Elias Kassem

Updated Dec. 5, 2023 at 12:05 a.m.

Israel has set two goals for its Gaza war: destroying Hamas and releasing hostages.

But it has no answer to, nor is even asking the question: What comes next?

The government of Prime Minister Benjamin Netanyahu has rejected the return of the current Palestinian Authority to govern post-war Gaza. That stance seems opposed to the U.S. Administration’s call to revitalize the Palestinian Authority (PA) to assume power in the coastal enclave.

For the latest news & views from every corner of the world, Worldcrunch Today is the only truly international newsletter. Sign up here.

But neither Israel nor the U.S. put a detailed plan for a governing body in post-war Gaza, let alone offering a vision for a bonafide Palestinian state that would also encompass the West Bank.

The Palestinian Authority, which administers much of the occupied West Bank, was created in1994 as part of the Oslo Accords peace agreement. It’s now led by President Mahmoud Abbas, who succeeded Yasser Arafat in 2005. Over the past few years, the question of who would succeed Abbas, now 88 years old, has largely dominated internal Palestinian politics.

But that question has gained new urgency — and was fundamentally altered — with the war in Gaza.

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